The Bank of England (BOE) is re-evaluating its plans to launch a digital pound amid shifting priorities towards stablecoins and tokenized bank deposits, according to people familiar with the matter.
Bloomberg reported that the BOE is urging commercial banks to redirect their efforts away from central bank digital currencies (CBDCs) and instead develop payment innovations that can deliver similar benefits to customers. This change in stance comes even though the digital pound project remains in its “design phase,” with a final decision yet to be made.
Governor Andrew Bailey has publicly expressed doubts about the necessity of issuing a retail CBDC, stating in June that he remains unconvinced “we need to create new forms of money.” Instead, he emphasised that banks should prioritise developing tokenized deposits, which some experts see as a more stable way to bridge traditional and decentralised finance.
Bailey, however, maintained support for a wholesale CBDC dedicated to facilitating transactions between financial institutions but appeared less supportive of introducing one for households. Research from BOE staff has also indicated that the benefits of launching a CBDC have weakened over time, especially as senior officials have gradually stepped back from leading discussions on the project.
Despite reconsidering its CBDC initiative, the BOE has not fully embraced stablecoins either. Earlier this month, Bailey warned against the risks of stablecoin domination, citing their lack of deposit protection and guarantees typically offered by traditional bank accounts. He noted that stablecoins could pose systemic risks to financial stability and potentially undermine the very nature of money if left unregulated.
“We are going to have to look at it very closely through that lens. It’s both a financial stability issue and a money issue in that sense,” he said.
The BOE’s approach contrasts with other jurisdictions that have recently halted their CBDC projects. The United States, under the Trump administration, paused its CBDC development over financial stability concerns, while South Korea suspended its digital currency pilot program earlier this year.
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